Current Situation of South Korean E-commerce Market Strong Monopoly by Three Major Players and Expansion of Influence by AliExpress

South Korean e-commerce market is dominated by three major players and AliExpress is expanding its influence

BusinessDialogue learned that recently, Forbes Korea released the Korean Shopping APP TOP 20 report based on user data from April. According to the report, the user and installation volumes in the Korean shopping app market have both entered a stagnant phase. Coupang maintains its strong leading position, and the triopoly of 11Street, Shinsegae Group, and Coupang continue to strengthen. Meanwhile, the influence of AliExpress is expanding among the male population aged 30 to 40.

The data shows that Coupang ranks first with 27.91 million users, more than 30% higher than the second-ranked 11thStreet with 8.27 million users, and Gmarket ranks third with 5.08 million users. However, the total number of users for businesses such as Auction, SSG.COM, EmartMall, and Shinsegae LiveShopping, under the Shinsegae Group (SSG), have reached 12 million. Therefore, Korea has formed a triopoly of Coupang, 11thStreet, and Shinsegae Group.

The financial investment industry analysis believes that the triopoly of Korea’s e-commerce giants will further intensify. Leading platforms attract numerous users with their capital strength and have a clear advantage in profitability and sustainability compared to other small applications and platforms.

According to KDB Securities data, among domestic e-commerce operators, Coupang has the most paid members of 11 million, followed by SSG.COM with 3.3 million.

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E-commerce platforms such as Coupang that dominate the market are seeking to expand profit margins by reducing delivery prices and increasing commission rates, while other companies see slow growth in user numbers and transaction volumes and expanding losses. Currently, the concentration of top e-commerce is expected to increase.

The Korean mobile e-commerce market is becoming saturated, with Coupang in a strong leading position.

The report pointed out that since 2011, Korean e-commerce has maintained a high growth rate of 20.7% in the past decade, and mobile e-commerce has developed particularly rapidly. As of 2022, mobile e-commerce accounts for 74.8% of Korean e-commerce. Considering that the penetration rate of Korean e-commerce is less than 30%, it is expected that the proportion of mobile e-commerce will continue to expand.

However, despite the overall growth of e-commerce, mobile e-commerce is showing signs of saturation. In June 2021, the number of mobile e-commerce users in South Korea was 35.78 million, which dropped to 35.13 million in April of this year. Shopping app usage time and monthly installation volume also declined in April.

According to an analysis of mobile e-commerce users in South Korea, men account for 44% and women account for 56%. In terms of age group, the population in their 40s has the highest proportion at 27.7%, followed by the population in their 20s at 24.5%. Overall, consumers aged 20-40 are the main users of mobile e-commerce.

Coupang has overwhelming advantages in terms of user numbers, new installations, total usage time, and user churn rate. In addition to leading in total number of users, Coupang also leads in the number of users in each age group compared to the second-ranked and other shopping apps. 11thStreet ranks second in all age groups of users.

AliExpress ranks third among users under 10 years old, fifth among users under 20 years old, and seventh among users under 30 years old. However, it did not enter the top ten in the age group over 40. Due to less anti-China sentiment, young people are more likely to accept AliExpress’s low-price strategy.

Although the growth of mobile e-commerce users in South Korea is saturated, data shows that Coupang’s user numbers are still steadily increasing. In April, its user numbers accounted for 79% of all mobile e-commerce users, equivalent to the majority of traffic; users used the app an average of 15.13 days per month, more than half the time.

In addition, as of April this year, the actual usage rate of the Coupang app was 99%, with almost all users who installed the Coupang app actually using it. This metric for AliExpress is 66.4%, while most other shopping apps are between 30% and 40%.

As of April this year, the user churn rate of the Coupang app was 8.5%, the only shopping app that maintained a single-digit churn rate, while most other shopping apps had a churn rate between 20% and 30%.

In terms of user cross-usage rate, the cross-usage rate between other shopping apps and the Coupang app averages over 80%. Cross-users also tend to use Coupang for longer periods of time and more frequently.

Since its establishment in 2010, Coupang has rapidly expanded its influence in the Korean market through large-scale self-owned logistics centers, delivery systems with direct employment, and fulfillment investments. Continuous losses have always been a problem for Coupang, but after achieving profitability for the first time in the third quarter of 2022, Coupang has achieved profitability for three consecutive quarters and is expected to achieve annual profitability for the first time this year.

The report also compares the recent user transfer and cross-user data of major shopping apps in Korea, revealing the competitive situation of major shopping apps.

In terms of user transfer, there were about 1.44 million users who used Coupang in January but did not use it in the following three months, of which 2.07% of users went to 11Street, 1.54% and 0.85% went to Gmarket and AliExpress, respectively.

At the same time, about 1.68 million users transferred from 11st to other apps, of which 52.06% transferred to Coupang, 6.66% and 4.73% went to Gmarket and Ticketmon, respectively. From February to April, there were approximately 1.05 million users lost on Gmarket, of which 56.65% transferred to Coupang, 10.94% transferred to 11st, and 5.99% transferred to Timon.

Overall, the proportion of Coupang users who switch to other apps is only 5%, which is significantly lower than other apps. This indicates that Coupang has higher customer loyalty and users of other platforms are more likely to switch to Coupang.

The report also compares the number of cross-users and usage of Coupang and 11st, and Coupang and AliExpress.

As of April this year, the cross-user volume between Coupang and 11st was 6.54 million, and the average usage time per person on Coupang was 2.96 hours, while the average usage time on 11st was 1.26 hours. The average usage days on Coupang was 17.91 days, which is far more than the 8.79 days on 11st, with Coupang having twice the performance of 11st on the latter two indicators.

As of April, the number of cross-users between Coupang and AliExpress is 2.5 million. The average usage time of Coupang is 2.30 hours, while AliExpress is 2.69 hours, with AliExpress leading the way; however, in terms of the average number of usage days, Coupang is 15.79 days, while AliExpress is 9.82 days.

It can be seen that the influence of AliExpress is on the rise. AliExpress entered the Korean market in 2018 and has only achieved rapid growth in the past three years. As of May 2020, the number of AliExpress users in Korea was 1.16 million, and it has increased to 2.9 million as of April this year, an increase of over 150% in three years.

Unlike other shopping apps, AliExpress has a significant feature, which is that the proportion of male users (50.8%) is higher than that of female users (49.2%). In terms of the proportion of users divided by age group, the proportion of men in their 30s (14%) and 40s (17.2%) is the highest. It can be seen that AliExpress’s influence is rising among this user group.

Editor ✎ Ashley/AMZ123

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